It was another restless session for the Dow Jones Industrial Average (DJI), thanks to mixed messages from Capitol Hill. Just a day after waxing optimistic on fiscal-cliff talks, House Speaker John Boehner (R-Ohio) admitted to "no substantive progress" in Washington, D.C., sending stocks lower around midday. However, while Senate Majority Leader Harry Reid (D-Nev.) pointed the finger at Republicans, he vowed Congress will "finalize this this year." Against this backdrop, and thanks to a round of encouraging economic data, Wall Street maintained the glass-half-full approach, with stocks finishing higher for a second straight day.
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The Dow Jones Industrial Average (DJIA) traded in a range of more than 100 points, but ultimately ended 36.7 points, or 0.3%, higher. As such, the blue-chip barometer settled north of both the 13,000 level and its 200-day moving average -- a feat accomplished just once since Nov. 6. Among the index's 30 components, UnitedHealth Group (NYSE:UNH) led the 21 advancers with a 3% gain, while Intel (NASDAQ:INTC) paced the eight decliners with a 2.8% loss. Alcoa (NYSE:AA), meanwhile, finished flat.
The S&P 500 Index (SPX) also dipped its toes in the red, but spent most of the session comfortably higher. By the close, the broad-market barometer tacked on 6 points, or 0.4%. Not to be outdone, the Nasdaq Composite (COMP) avoided negative territory altogether, soaring 20.2 points, or 0.7%, to end atop the 3,000 level for the first time since Nov. 6.
On the other hand, the CBOE Market Volatility Index (VIX) gave up 2.9% on the day.
A Trader's Take
"There was once again a lot of rhetoric from Washington regarding the fiscal cliff, but in the end the strong pending home sales report and a great revision higher to third-quarter gross domestic product (GDP) were big pluses for the bulls," said Schaeffer's Senior Technical Strategist Ryan Detrick. "After yesterday's strong price action we didn't give anything up -- in fact, we gained some more. Under the surface we had some big-time outperformance from small caps. They usually lead during healthy times, and that is exactly what we've been seeing recently."
Broadening the scope a bit, Detrick noted, "The reality is the economy isn't great and the fiscal cliff is scaring everyone; still, the economy is on much better footing than most give it credit. With the lowered overall expectations we've been talking about, this could be a really nice sign for continued gains."
Economic and Earnings News
Initial jobless claims fell by 23,000 last week to a seasonally adjusted 393,000, reported the Labor Department, as claims for the previous week were upwardly revised to 416,000. The data was stronger than anticipated, as economists were looking for 395,000 first-time claims for unemployment benefits. However, the four-week moving average of initial claims rose by 7,500 to hit a new annual high of 405,250.
The U.S. economy expanded at an annual rate of 2.7% during the third quarter, according to the Commerce Department, up from the advance estimate of 2.0%. The preliminary GDP reading fell just shy of the consensus estimate for 2.8% growth, but marked the fastest pace of expansion since the fourth quarter of 2009.
The National Association of Realtors (NAR) said its pending home sales index improved 5.2% in October to 104.8, blowing past economists' average estimate for a 1.0% rise. Additionally, the September index was upwardly revised to 99.6. "We're seeing more impact now from steady job creation and rising consumer confidence about home buying," noted NAR Chief Economist Lawrence Yun.
Optimism rose during the week ended Nov. 28, according to the latest survey by the American Association of Individual Investors (AAII). The percentage of respondents with a bullish view on stocks checked in at 40.9%, up from 35.8% in the previous week. The percentage bearish dropped to 34.4% from 40.8%, while the percentage neutral edged up to 24.7% from 23.4%.
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